Not long after expressing his support for the cryptocurrency industry, at the same time accusing his opponent in the United States presidential race, Joe Biden, of the perceived animosity towards the sector, former US President Donald Trump has announced major taxation cuts if elected.
Indeed, Trump was referring to President Biden’s latest budget proposal, which would introduce new and increased capital gains tax and which could impact crypto investors, stating he would, on the other hand, impose the “biggest tax cut” for all social classes, he said at a campaign rally on May 12.
“Instead of a Biden tax hike, I’ll give you a Trump middle class, lower class, business class, big tax cut. You’re gonna have the biggest tax cut. And we were set to do that, we were all set to do it.”
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As it happens, in line with the standard Republican approach, the Trump campaign’s proposal plans to lower the maximum capital gains tax rate to 15%, which would follow his previous term, during which the administration dropped this rate to a maximum of 20%, as Finbold reported on May 2.
Impact on crypto
Still, the previous tax bill that Trump signed into law in December 2018 fails to clarify matters for crypto investors, traders, issuers, and miners, as it doesn’t directly address digital assets like Bitcoin (BTC), Ethereum (ETH), and tokens issued through initial coin offerings (ICOs).
However, it does have an indirect impact, as certain attorneys believe that capital gains taxes might still apply to crypto assets. On the contrary, at least some crypto investors consider the sale of Bitcoin for Ethereum, for instance, as a like-kind exchange that is exempt from section 1031 of the tax code.
Specifically, as Jeremy Naylor, a partner at Proskauer Rose LLP, explained, taxpayers who treat crypto-for-crypto exchanges as like-kind are “taking the risk that if they got audited, the [Internal Revenue Service (IRS)] would disagree,” considering that “it’s clear now that you can’t do that” under the new law.
Moreover, the exemption that section 1031 previously applied to “property of like kind” only applies to “real property of like kind,” which excludes crypto assets. By following this logic, crypto is subject to capital gains tax, and Trump’s promised cuts would mean lower capital gains taxes for crypto traders and investors.
Donald Trump and crypto industry
Meanwhile, the former President has recently stated that he was “fine with” crypto, promising that he would let crypto businesses, which he believes are currently leaving the US because of “hostility toward crypto,” exist in the country, as well as accepting crypto contributions to his campaign.
As a reminder, Trump had gradually modified his crypto stance, shifting from arguing that “Bitcoin is a scam” to launching his own non-fungbible token (NFT) collection called Trump Digital Trading Cards, to an even more openness regarding paying with Bitcoin and other crypto assets.
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